Commercial Mortgage Market Monitor May 2018

Monthly Commentary

The CMBS 2.0 delinquency rate and special servicing rate remained relatively flat in May, at 0.43% and 0.98%, respectively.

One of the largest loans to become newly delinquent was $32MM Monarch 815 at East Tennessee State (2.7% COMM 2015-CR25), secured
by a 576-bed Class A student housing complex located walking-distance from East Tennessee State University. The property was developed by
the sponsor between 2014-2015 at a cost of $37.1MM. Despite the property’s limited performance history, the sponsor was able to execute a
cash-out refinance with 10-year CMBS debt that included a property appraisal at 120% of cost ($44.5MM). As of year-end 2017, the property
was 65% occupied and the loan carried a debt service coverage ratio (DSCR) of 0.45x.

The two highest severities during the month came from liquidations of 2014-construction multi-family properties located in the Bakken Shale
region of North Dakota. $10.3MM Custer Crossing (COMM 2014-CR15), secured by a 108-unit apartment building in Dickinson, ND, was
liquidated at a 57% severity. Meanwhile $4.4MM Pheasant Ridge II Apartments, secured by a 42-unit apartment building in Waterford City,
ND, was liquidated at a 59% severity. Both properties experienced significant declines in occupancy within 12-months of loan closing as
falling oil prices triggered a pullback in local production.

In new issue CMBS, ten private label deals priced ($5.7BN), including four conduits ($3.4BN) and six Single Asset Single Borrower (SASB)
transactions ($2.3BN). Two of the conduits used horizontal risk-retention structures with both LCF AAAs pricing at swaps +90bps. The other
two conduits included a vertical risk-retention structure and an L-shaped risk retention structure, with the LCF AAAs pricing at swaps +77bps
and swaps +82bps, respectively. One of the SASB transactions was 10-year fixed-rate, secured by three multi-family properties located in NYC
and San Francisco, with the AAAs pricing at swaps +90bps.